Sterling headed towards six-week highs against the greenback on Tuesday as investors continued to cut their short positions, even as the U.K. PM Boris Johnson stuck to his promise to take the U.K. out of the European Union by 31 October.
Experts said traders were proceeding to reverse their guesses against the currency as they cautioned about being caught on the wrong side should the pound further extend a rally it began last week.
A broader weaker greenback also supported the pound in shifting higher Tuesday.
Boris Johnson is required by a law passed this month to ask the EU for a three-month stay on Brexit if a divorce agreement is not approved by Oct. 19; however, British media reported that his team has ways to circumvent it. Johnson stated Monday Brexit would happen on Oct. 31, with or without a deal.
Britain’s supreme court has begun to hear the federal government’s argument that Johnson’s choice to suspend parliament until the Brexit date was not unlawful as Scottish judges ruled last week.
His opponent parties say the suspension was aimed at impeding parliament from stopping a no-deal Brexit, an accusation Johnson refuses.
The currency has firmed over 3% in August, its gains accelerating after parliament passed the law ruling out no-deal Brexit. It hikes 1.3% last Friday, grasping at a headline — later denied — that Johnson’s Northern Ireland allies might soften their Brexit stance.
Pound Monday hit a six-week high of $1.2515. The currency was struck by the volatile greenback, which surged late on Monday as oil prices eased and trade strains with Japan appeared to cool.
Traders are now bracing up for the U.S. Federal Reserve’s policy meeting this week.